Brexit has been a “big contributing factor” in companies snubbing the City of London and listing in New York, a senior economist said on Monday.
Simon French, Head of Research at Panmure Gordon, said UK stock market valuations had slumped since the 2016 vote to leave the EU.
His comments come as betting giant Flutter Entertainment, which owns bookmaker Paddy Power, is reported to be consulting shareholders over a listing on the New York Stock Exchange.
Chip maker Arm and building materials firm CRH, which have a combined market value of around £80billion, have already announced plans to float in the US instead of London in a major blow to the UK’s reputation as a global finance hub.
Mr French said that while US valuations were higher because of other factors such as its greater proportion of high value tech companies, the impact of Brexit could not be ignored.
He told BBC Radio 4’s Today Programme: “Some of it is compositional, some of it is the fact that there are more higher growth businesses in the United States markets. The depth of liquidity in the UK is much lower than it is in the United States.
“But we have to mention the B word. Brexit has been a big contributing factor here. This discount did not exist in 2016. And since then, valuations have moved lower in the United Kingdom, while they’ve moved higher in both the US most obviously, but also in Europe.”
Although a survey by Deloitte, published on Monday, showed confidence in the economy rising among UK company finance chiefs, some of the costs of Brexit are starting to emerge.
The Government’s economic watchdog, the Office for Budget Responsibility, has said that the post-Brexit trading deal reached with the EU will reduce Britain’s long-run productivity by some four per cent, compared with if the UK had remained in the bloc. It added that both exports and imports will be around 15 per cent lower in the long run than if Britain had stayed in the EU.
Last week the Standard reported how experts are predicting that could lead to full time workers with average earnings being around £1300 worse off a year.
At the same time Chancellor Jeremy Hunt has admitted that a trade deal with the US - seen as one of the great prizes of Brexit - would not be agreed “imminently”.
Mr Hunt and Prime Minister Rishi Sunak have made restoring economic stability and halving inflation one of the Government’s key priorities.
And while the International Monetary Fund predicted last week that the UK economy would see a 0.3 per cent fall in GDP this year, the Deloitte survey showed confidence rising at its highest rate since 2020 as concerns over rising energy prices and political instability subside.
Ian Stewart, chief economist at Deloitte, said: “Since the beginning of the year, energy prices have fallen, inflation looks to have peaked, relations with the EU have improved since the Windsor framework and there has been a period of comparative political calm after the turmoil of last year.”
